Gruppo Poste Italiane

POSTE ITALIANE GROUP
Investor Presentation
June 2013
A Brief History of the Poste Italiane Group
1
2011
Postal and related
financial services,
performed by an
administrative
department of the
Italian Government
were transferred into a
separate and
independent unit of the
Government’s public
administration
A year after the birth
of the Kingdom of
Italy the National
Postal Law was
passed reserving the
postal service
monopoly to the
State
1862
1925
On February 28th
Poste Italiane is
transformed from
a public economic
entity to a joint
stock company
(società per
azioni) wholly
owned by Ministry
of Economy and
Finance (MEF)
2001
1998
1994
The Italian postal
system is structured in
two distinct entities: the
Postal and
Telecommunication
Ministry with a
controlling and
governance role and
Poste Italiane, public
economic entity with the
role of operator
Presidential
Decree 144/01
identifies and
regulates the
banking and
financial services
which can be offered
by Poste Italiane
through the
Bancoposta
Business Division
Creation of Bancoposta
Ring Fenced Capital (RFC)
(patrimonio destinato) to be
used exclusively in relation
to the “Bancoposta”
activities of Poste Italiane
A Solid Business Model Based on Diversification, Integration, Innovation
The Group is a high value added service company, featuring a business model based on
diversification, integration and innovation
Communication
Payments
INTEGRATION &
INNOVATION
Integrated services that
combine physical
communication services with
new functionalities from
internet, digitalisation and
payment platforms
DIVERSIFICATION
Financial
Services
Mobile phone
Insurance
2
Poste Italiane Group: A Major Services Group with Wide Diversification
Postal and
Business
Services
Mail, express courier,
logistics and parcels,
philately and activities
carried out by the various
business areas of the
Parent Company for the
other business segments.
Includes also the
following companies
Financial
Services
Insurance
Services
Provision by
Sale of both life
insurance products
under classes I, III, IV,
V and VI, through
Poste Vita, and since
its launch in 2010, of
non-life insurance
products through
Poste Assicura
of current accounts and
payment services,
investment products and
third parties financing
services. Includes also
the following companies
3
Other Services
Activities carried out by
Poste Mobile, the
mobile network
operator and
Consorzio per i Servizi
di Telefonia Mobile
EGI
€ million
Revenues
2012
EBIT
2012
TOTAL
4,657
5,312
13,833
267
24,069
416
565
371
30
1,382
Business Diversification and Innovation – Benchmark with Peers
4
% Revenues from non Traditional Services(1) on Total Revenues 2002 - 2012
2002
80.7
2012
47.3
47.2
24.1
22.8
7.7
1.8
Royal Mail (2)
EBIT/
Revenues
2012
50.5
La Poste
DP-DHL
Poste Italiane Group
(3)
+4.0%
+3.8%
+6.7%
+9.8%
Poste Italiane has focused its strategy more than other operators on business innovation
and diversification, achieving higher profitability
(1)
(2)
(3)
Includes all revenues excluding the ones related to Postal Services and Express Courier
On 1 April 2012, Royal Mail Group reports its performance excluding Post Office Limited
Poste Vita and BancoPosta Fondi consolidated by equity method and Bancoposta revenues net of commissions and interests paid on current accounts
Source: Operators Annual Reports
Agenda
1. Poste Italiane Group
2. Business Segments Analysis
3. Regulatory Framework
4. Group Financial Performance
5. Key Investment Themes
5
Postal and Business Services
MAIL
• Provision of traditional
postal services, as
well as direct
marketing and
innovative services
within the broader
sector of paper-based
and electronic
communications. The
business area also
includes services
provided by the Postel
Group in the mass
printing sector
6
Express Delivery
and Parcels
• Express delivery
products offered on
the deregulated
market by Poste
Italiane to retail and
small and medium
enterprise (SMEs)
customers and by
SDA Express Courier
to business
customers
PHILATELY
• Distribution and sale
of stamps, which is
the sale of postage
and revenue stamps,
and products for
stamp collectors
Poste Italiane provides the Universal Postal Service that includes a number of essential
services to be provided, at reasonable prices, to all users on the territory of Italy
The mandate for Universal Postal Service has been renewed for 15 years from April 2011
by the Ministry of Economy and Finance
Mail – Leading Position in the Market with an Uncomparable Network
Leading Position
• First Postal Operator in Italy
with 14 million of letters
managed per day
• More than 3.3 billion
revenues
• 1.5 million clients daily in
postal offices
• 30 million of served
addresses
High Quality Level
• 92.7% of Priority Mail
delivered in j+1 compared to
an assigned objective of
89.0%
MAIL
Unique Network
•
•
•
•
•
•
60,000 post boxes
21 sorting centres
2,788 delivery offices
47,318 resources operating in the delivery activities
18,500 postal officers equipped with mobile devices
600 thousands km covered daily
* All data refers to year 2012
7
Mail – A Strategy based on Quality, Innovation and Value Added Services
8
With mature postal service market characterized by decreasing volumes, in line with the
trend of other European postal markets and due to the digitalization of communications
and to the current economic downturn, Poste Italiane focuses on:
1
Volume Support
• Communication and commercial campaigns
• Offering of additional services for the retention of the customer
base, with focus on business and public sectors
• Raccomandata 1, Posta time, tailor made delivery
services, Postafree, dedicated projects with public sector
2
Improvement of Efficiency and Operating Quality
• Improvement of the dispatch network: reduction of sorting
centres, integration of tracking systems, real time monitoring
• Efficiency improvements of the transport network
• Reorganisation of delivery: introduction of five days a week
delivery, strengthening of facilities and infrastructures,
development of an Innovative Service Unit
3
Innovative and
Integrated Value Added Services
• Enrichment of Direct
Marketing offering
• Digital services integrating
physical and electronic
communication
• Certification and security
services
• Integrated services to
create customised
solutions for public sector
and large companies
Express Delivery and Parcels Strategy
9
Although in recent years this sector has witnessed a reduction in demand and a general
lack of confidence all over Europe, the Group continued to improve its competitiveness
and offerings in order to take advantage of opportunities in emerging segments of the
market (eg. e-commerce)
Domestic
• Extension of product
range with the introduction
of services designed to
customise deliveries
based on customer needs
• “Al piano” (to the floor
service)
• “Su appuntamento” (on
appointment)
• “Di Sabato e di Sera”
(on Saturdays and
evenings)
International
• Partnership between SDA
and UPS
• UPS progressively
outsources to SDA the
pick up, dispatching,
transportation and
distribution of express
courier in various parts
of Italy
• UPS provides transport,
customs clearance and
delivery services for
international
destinations
A Brief History of BancoPosta
10
• Presidential Decree 144/01
identifies and regulates the
banking and financial services
which can be offered by Poste
Italiane through the
Bancoposta Business Division
 Prohibition for
Bancoposta from
engaging in lending
activities vis-à-vis the
public
• The business model
developed has allowed
Bancoposta to offer a full
range of products and
services without the need
of a banking license
 Bancoposta structures
products and services and
selects, if necessary, third
parties to offer the same
services directly and
indirectly to clients
2001
2011
2006
• Law 296 – Budget Law 2007 changes rules
and defines guidelines for private clients
current accounts liquidity policy
• All funds are mandatorily invested in
Eurozone sovereign debt securities
• Law Decree
225/2010 (Law
10/2011) establishes
the obligation to
create a Bancoposta
Ring Fenced Capital
(RFC) (patrimonio
destinato)
• Bancoposta RFC
assets and liabilities
are unbundled from
those of Poste
Italiane and to be
used exclusively in
relation to the
“Bancoposta”
activities of Poste
Italiane
Financial Services – A Comprehensive Range of Products
• 30 million total
customers for
BancoPosta services
• Total Assets under
management: around 430
billion euro of which 310
billion euro of postal
savings with 25 million
customers
• Leader in the domestic
market and a leading
player in Europe with
around 16 million
payment cards
• 6.6 million of debit
cards
• 9.56 million of prepaid
cards (Postepay)
Financial Services
• Collection of savings from
the public (Art. 11, par.1, of
the Banking Act) and all
related and consequent
activities
• Collection of savings
through postal securities
and deposits
• Payment services,
including the issuance,
administration and sale of
prepaid cards and other
payment instruments
• Foreign exchange
brokerage services
• Promotion and placement to
the public of loans granted
by approved banks and
financial brokers
• Investment and related
services (Art. 12 of
Presidential Decree 144/01)
• Total current accounts:
5.88 million
• Total average deposit:
41.4 billion €
• Active on line current
accounts: 1.5 million
• Number of yearly
transactions: 21 million
• Amount of third parties
financing services
granted: 1.9 billion €
* All data refers to year 2012
11
Current Accounts – Core Service with Growth Trends and Profitability
Liquidity Investment Policy
Core Growing
Service
• Represent
BancoPosta's core
basic service, in
particular for retail
customers
• During the years such
service has been
enriched by services
and benefits that
make it comparable
to the ones offered by
a bank
• Trend of continuous
growth
• 5.88 million
customers
• 41.4 million yearly
total average
deposit (up by 9%
vs 2011)
* All data refers to year 2012
• Liquidity from current accounts of private customers
BancoPosta is mandatorily invested in Eurozone sovereign debt
securities
• As at 31/12/2012 the euro 36.5 billion, are entirely invested in
Italian government bonds
• The portfolio has been built since 2007 under different market
conditions allowing a stable yield level and a very low volatility
for the next years
• Liquidity from current accounts of the public sector entities is
deposited with the MEF and remunerated at a floating rate of
interest that can be revised every fifteen days on the basis of a
basket of market indices
• As at 31/12/2012, the amount of such liquidity is approximately
euro 5.4 billion
12
Postal Savings – Stable and Long Term Partnership with Cassa Depositi & Prestiti
13
 The agreement with CDP, relating to the placement activities of postal securities and
deposits carried out by Poste Italiane exclusively on behalf of CDP, and defining fees
and operational modalities, was renewed for the years 2011-2013 with a roll-forward
option up to 2016
310 billion with
25 million
customers
Poste Italiane, continues its long term relationship with CDP working together for the
launch of new products and services
Payments Services – Leading Position through Continuous Innovation
c/c BancoPosta and
Postamat debit card
2000
Payment slips
(bollettini)
Virtual Prepaid card
e-Postepay
2011
Prepaid card Postepay
2003
M-payment
PosteMobile
…..
Digital Identity
Prepaid card
contactless Postepay
2011
9.56 million of prepaid cards
6.6 million of Postamat debit
cards
Multichannel
Poste Italiane has a leading position in payment services thanks to a complete and
innovative range of products, accessible through a variety of channels
14
Insurance Service – A Successful Story
• Leading market position being the first Life
insurance company in terms of premium
issued in Italy in 2012, with a 15% market
share
• Leader in the pension market with 510,000
pension plan members in 2012
• Technical reserves amounted to 56.8
billion in relation to around 2.5 million
clients and 4.6 million insurance policies
• Prudent investment policy currently
resulting in a portfolio with significant
unrealized gains
15
• Began operating in April 2010
• Authorised to sell non-life insurance
policies with two principal product lines:
personal protection and property
protection
• Among the 10 leading operators of
Bancassurance damages
Web
Postal Offices
Call center
Investment policy based on a highly prudent approach
Poste Vita Further Growth Opportunities
Challenging Welfare
market context
Welfare is a global issue
with strong relevance on
government spending
both in Italy and in
developed countries…
… in a context of
spending reductions and
increase of customer
needs due to
demographic trends and
economic downturn
In Italy the individual “out
of pocket” spending is
elevated
16
Low participation of
insurance system to Welfare
Poste Vita is
currently
strengthening its
product offer and
service model to
fully leverage market
context with strong
under-penetration
opportunities,
building on current
leadership position
and expertise
~ 70%
Households
without Home
insurance
~ 70%
Households
without Life
insurance
~ 75%
Workers without
Complementary
pension plan
~ 85%
Households
without Health
insurance
Other Services – Poste Mobile
17
Poste Italiane possesses those competitive elements, typical of its business, that can
distinguish itself from other telephone operators and represent a success factor
Distribution
Network
Client Base
Strong Brand
Awareness
Presence in the
financial sector
“To make life’s relationships easier by offering innovative, easy to use and convenient
mobile services” …Simply with your SIM card…
NFC
mCommerce
Money transfers
mPayment
mBanking
* All data refers to year 2012
Near field
communication
services
• mPayment
• mGovernment
• mTicketing
• 2.5 million number of lines
• 23.4 million mobile payments
operations, including 8.2 million
outgoing payment transactions
Agenda
1. Poste Italiane Group
2. Business Segments Analysis
3. Regulatory Framework
4. Group Financial Performance
5. Key Investment Themes
18
Postal Services – Regulatory Framework
19
• Since 30 April 2011, with the implementation of the Third Postal Directive, the Italian Postal
Market is fully liberalised and the reserved area has been eliminated, except for a minor
share of volumes related to legal process and notification of violations of the Italian highway
code
• Poste Italiane provides the Universal Postal Service and the relative mandate has been
renewed for 15 years from April 2011
 Includes a number of essential services to be provided at reasonable prices, to all users
on the territory of the Republic of Italy
• The Planning Agreement regulates the relationship between the Ministry for Economic
Development and Poste Italiane in connection with the Universal Postal Service
 Sets the obligations of Poste Italiane
 Defines the public compensations for Poste Italiane, calculated on the basis of a
subsidy cap mechanism
 At the moment, Planning Agreement 2012-2014 is still under discussion; in the meantime
provisions of previous Planning Agreement apply
Financial Services and Insurance – Regulatory Framework
20
• Presidential Decree 144 regulates the banking and financial services which can be offered by
Poste through the BancoPosta, excluding lending activity, also applying the same provisions
which apply to Italian banks and other financial intermediaries (eg. transparency, antimoney laundering, etc.)
• With respect to the Bank of Italy's supervision, the Bank of Italy resolution no. 229/99
(supervisory instructions for banks) has been amended in 2004, introducing a specific section
relating to BancoPosta (e.g. reputational and professional requirements, organizational
requirements of internal controls, regulatory and supervisory surveillance, etc)
• Following the creation of BancoPosta RFC, the Bank of Italy is expected to issue a specific
resolution, basis for the application of regulatory and prudential supervisory rules and of
internal procedures for the assessment of the capital adequacy vis-à-vis the risks
• With reference to investment services the legal framework and surveillance of CONSOB are
the same as those applicable to other Italian intermediaries
• The insurance business of the Poste Group is carried out by the Poste Vita Group and is
subject to the supervision and regulation of IVASS (previously ISVAP)
Agenda
1. Poste Italiane Group
2. Business Segments Analysis
3. Regulatory Framework
4. Group Financial Performance
5. Key Investment Themes
21
22
Summary Income Statement
€m
Revenues from sales and services
2010
11 VS 10
%
2011
12 VS 11
%
2012
10,134
10,120
(0.1)
9,933
(1.8)
Insurance premium revenue
9,505
9,526
0.2
10,531
10.6
Other income from financial and insurance activities
1,982
1,877
(5.3)
3,463
84.5
216
170
(21.3)
142
21,837
21,693
(26.5)
24,069
11
2,559
2,583
0.9
2,766
7.1
10,190
9,887
(3.0)
12,988
31.4
388
882
127.3
164
6,005
5,896
(1.8)
5,895
0.0
Depreciation, amortisation and impairments
547
544
(0.5)
649
19.3
Other operating costs
278
260
(6.5)
225
(13.5)
1,870
1,641
(12.2)
1,382
(15.8)
18
13
(27.8)
41
215.4
1,888
1,654
(12.4)
1,423
(14.0)
870
808
(7.1)
668
(17.3)
Other operating income
Total Revenue
Cost of goods and services
Technical provisions for insurance business
Other expenses from financial and insurance activities
Personnel expenses
EBIT
Finance Income/(charges)
Profit/(Loss) before tax
Income tax expense
Income tax profit due to change in legislation
Profit for the year
1,018
846
(16.9)
(16.5)
(81.4)
(278)
1,032
22.0
The Group’s overall economic performance is consistently positive despite the economic
downturn, the unfavourable postal market conditions and the legal constraints to the parent
company’s business
Even considering the extraordinary tax profit for the year, net profit for 2012 is in line with
previous years
Total Revenues Show a Growing Trend
23
REVENUES (€ million)
2011
2012
+11%
24,069
21,693
13,833
11,278
5,162
4,657
5,033
5,312
220
Postal and Business
Services
Financial Services
Insurance Services
267
Other Services
Total Group Poste
Italiane
The strong growth in financial and insurance services compensates the expected decline in
the sales of postal services
Poste Italiane Group Confirms High Profitability
24
EBIT(€ million)
1,641
2011
2012
1,382
834
580
565
416
371
199
28
Postal and Business
Services
Financial Services
Insurance Services
30
Other Services
Total Group Poste
Italiane
Thanks to business diversification Poste Italiane confirms high profitability, compensating the
expected reduction in the postal market
The 2012 economic results of the Group’s Financial Services segment remain strong despite
financial crisis and market volatility
25
Summary of Financial Position
€m
Non financial non-current assets
2010
11 VS 10
%
2011
12 VS 11
%
2012
3,654
3,516
(3.8)
3,320
(5.6)
995
1,726
73.5
1,812
5.0
(1,323)
(1,196)
(9.6)
(1,440)
20.4
Net invested capital
3,326
4,046
60.1
3,692
(8.7)
Net funds
1,057
(1,198)
(213.3)
1,959
(263.5)
(4,383)
(2,848)
(35.0)
(5,651)
98.4
Working capital
Staff termination benefits
Equity
The Group’s financial structure is solid, balanced, and properly protected from liquidity or
refinancing risks
Non-financial non-current assets are fully covered by equity
Overall borrowings are primarily medium/long-term
The € 750 million bond issued in 2002 was repaid at maturity in July 2012
26
Summary of Financial Position
Net funds
€m
Financial Liabilities
2010
2011
2012
42.481
45.152
51.159
40.290
43.206
45.091
36.985
1.297
7
2.001
37.145
3.559
40
2.462
39.920
2.709
(7)
2.469
2.191
1.946
6.068
1.386
83
722
1.282
603
61
5.203
864
1
Technical provisions for insurance business
41.731
44.242
56.743
Financial assets
(81.825)
(83.733)
(104.148)
Current Assets
(14.701)
(15.272)
(15.603)
(10.230)
(4.056)
(415)
(10.863)
(4.010)
(399)
(11.237)
(4.072)
(294)
(67.124)
(68.461)
(88.545)
(26.670)
(39.630)
(824)
(26.476)
(41.341)
(644)
(33.987)
(53.936)
(622)
2.387
5.661
3.754
Cash and deposits attributable to BancoPosta
(2.351)
(2.560)
(3.180)
Cash and cash equivalents
(1.093)
(1.903)
(2.533)
Net debt/(funds)
(1.057)
1.198
(1.959)
Current Liabilities
Postal current accounts
Borrowings
Derivative financial instruments
Other financial liabilities
Non-current Liabilities
Borrowings
Derivative financial instruments
Other financial liabilities
Financial Services
Insurance Services
Postal and business services
Non-current Assets
Financial Services
Insurance Services
Postal and business services
Net financial liabilities/(assets)
Financial Debt of Poste Italiane SpA
27
Poste Italiane SpA is responsible for Group funding
Substantially unleveraged, with limited M/L term debt outstanding, following € 750 million
bonds repayment at maturity in 2012 (excluding LT repo of BancoPosta)
Liquidity needs covered by ST committed credit lines (over € 500 million), fully undrawn
M/L Term Financial Debt of Poste Italiane SpA
(31.12.2012)
Debt repayment schedule
€ million
• € 250 mln 10 yrs bank loan due in Sep 2013
• € 200 mln EIB 7 yrs loan due in 2018
• € 200 mln EIB 7 yrs loan due in 2019
Agenda
1. Poste Italiane Group
2. Business Segments Analysis
3. Regulatory Framework
4. Group Financial Performance
5. Key Investment Themes
28
Key Investment Themes - Basis for Success
29
ICT
INFRASTRUCTURE
The most extensive
physical network in
Italy with almost 14,000
postal offices …
340
71
… powered by
advanced technology
with the highest
standards of quality
and security, thanks to
past investments
PHYSICAL
NETWORK
LOGISTIC
NETWORK
MULTICHANNEL
ACCESS
350
2,015
1,098
1,452
978
458
1,001
279
446
503
174
493
839
1,029
452
186
673
839
4.3 billion euro
of capital
expenditure
since 2005 out of
which a large
portion on IT
A unique
infrastructure
to perform a
diversified,
integrated and
profitable
business
Key Investment Themes - Distinctive Elements of Poste Italiane
1
Low business
risk due to
services
diversification
30
● Multi-business (mail, parcels, payment and current account services, asset
gathering, insurance and mobile communications)
● Multi-clients, over 30 million including retail clients, SMEs, large corporates and
Public Sector entities
● Uncorrelated business segment performance, as shown by record results of
Poste Vita and Postal Savings distribution in a downturn economy year such as
2012 which had an impact on postal volumes
2
3
Strong market
presence with
diminishing
State
contribution
Sound
financials
● Around 92% of market revenues* and less than 8% from the State and Public
Sector entities
● Largest network in Italy (approx. 14,000 offices) with strong brand and
advanced technological infrastructure
● Stable revenues with a significant portion almost certain over the next years (i.e.
commissions from CDP for the distribution of Postal Savings and interest income
from current BTP portfolio, acquired under favourable market conditions, now
providing a satisfactory return)
● Highly profitable compared to peers
● Strong operating cashflow generation
● Liquidity position with very low M/L term debt (€ 400 mln from EIB)
* Poste Vita and BancoPosta Fondi consolidated by equity method
31
Appendix
Poste Italiane Group as at 31/12/2012
Ministry of
Economy and Finance
32